Digital magazines, the new media, and why HP's $99 tablet could spark a digital renaissance

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So, unless you had your head in the sand, you probably noticed HP’s Touchpad tablet computers flying off the shelves of stores after the company slashed the price to $99 ($149 for the 32GB model) and announced that it was discontinuing the product line.

My first thought was, “Wow, this is the ‘$100 laptop’ for American buyers…” A device that could change the way Americans interact with digital media, just as the One Laptop Per Child project aimed to do for children with minimal computer access in developing countries.

There’s a little problem, though: there are other $100 tablets on the market (they’re pretty much crap, unlike the Touchpad), and HP’s cost an estimated $300 per unit to make. Even a child could tell you that selling something at a loss is no way to make money.

But let’s set aside the problem of economics for now. Instead, let’s consider the inroads that such a product could make for digital magazines, newspapers, and other content.

An app-store model

The key to iTunes’ success (and consequently, the iPad and iPhone’s) has been the way it has made purchasing and consuming digital content (from apps to music) so easy. The barrier to entry for consumers is low: click the $0.99 button, enter your password, and within seconds you’ll be happily flinging Angry Birds or bopping to the latest Black-Eyed Peas song.

The other key to any app store’s success appears to be sheer size: HP’s app store launched with a mere 6,000 apps—a weak shopping catalog compared to the hundreds of thousands selections for Android and Apple.

The technology for visually rich digital content (magazines, cookbooks, newspapers…) is ready. So is the technology for vast viral marketing, thanks to social networks. Check out this demo of Wired’s digital magazine to see how it all can come together:

The missing link

The real breakthrough that no app store has made, however, is one that HP happened to stumble over in its rush to liquidate the tablets: there is no good quality, affordable device for bringing visually rich digital content into the hands of the average middle class American family.

We have our MP3 players and our smartphones. We have our laptops and our desktops. Quite a few of us even have our Nooks and Kindles. But most of us aren’t ready to drop $500 on a tablet when all of our other devices seem to cover everything it does.

Yet the tablet is ideal for that specific kind of content that’s less user-friendly to access on any of our other devices. But because we’re not yet accustomed to consuming this sort of content in large amounts—we’re still reading print publications, though less and less—tablets still fall in the category of “nice to have” for most of us, not “must have.”

That’s a huge missed opportunity for the failing print industry, because we need affordable, portable devices if we’re to consume their digital magazines and newspapers—and it’s passing up enormous potential for vibrant digital advertisements that we’d eagerly interact with. (Just look at the ones in the Wired video above!)

The time is now

I believe there’s no question that mainstream America is ready for the transition from print to digital. (And to avoid any nasty comments, let me just say that I’m sure the Canadians and Europeans reading this are just as eager for affordable tablets.)

This is a conclusion I’ve reached multiple times over the last year, as I have let my magazine subscriptions lapse—Who has time to read them? Who wants to throw away or store masses of glossy paper?—and my free weekly local newspaper languishes in my driveway. Meanwhile, I’m squinting to access the same content on my smartphone, or frustrated at how it competes with my paid work when I’m using my laptop during the week.

I know I’ll buy a decent tablet eventually. But in the meantime, advertisers and the media are missing out on lots of revenue from me, and I’m stuck in a black hole between digital and print. Consider this: I work in the tech industry. How much more could this be true for the device-savvy teens and college students who have come of age with the expectation that they’ll have this content at their fingertips and be able to share it with their friends via social networks?

There’s a second factor that’s made me realize how much the market needs this $99 tablet: Touch-screens are extremely intuitive for children, and as a result, they’re already primed to receive digital content in this way.

My 2 year old can turn on my iPod touch, unlock it, select her game of choice, toggle between apps, and play the games. No one taught her how to do this. She begged to have a turn to play Gina the Giraffe (granted, she thinks it’s a cow) when she saw her 4 year old brother playing. With all the stubbornness a two year old can muster, she refused to let anyone show her how to play—and instead kept touching (and watching others play) until she figured it out. The same has been true for a half-dozen other games. And just last weekend, I saw her demonstrate one finger motion to her grandfather, who was trying to figure out the interface.

From interactive preschool games to nature videos, these tiny tots are the next generation of consumers, and they’re already influencing buying decisions. (How exactly do you think Cut the Rope ended up on my husband’s Android phone?)

Getting from here to there

So it’s time to bring that economics problem back into the conversation. If the cost of a device is the only remaining barrier between your average person and the consumption of mass amounts of digital content, it seems reasonable to think there’s a business model that could overcome it. Grocery stores and even video game device manufacturers have mastered the art of the loss leader; perhaps there’s a place in the tablet market for a similar strategy.

Clearly open standards and open source operating systems like Android offer one way to lower costs and increase choice; but the loss leader model too often relies on vendor lock-in. (The Nintendo proposition: Buy our game system at a discount, and it will only play our games, which also won’t run on any other brand of system.)

Can you conceive of a better business model? What other barriers still exist for the transition from digital to print?

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About the author

Rebecca Fernandez - Rebecca Fernandez is a Principal Program Manager at Red Hat, leading projects to help the company scale its open culture. She's an Open Organization Ambassador, contributed to The Open Organization book, and maintains the Open Decision Framework. She is interested in the intersection of open source principles and practices, and how they can transform organizations for the better.

18 Comments

Subscription model like we have with cell phones. If I could pay a flat rate per month and access a certain amount of print media on a tablet, and get the tablet thrown in as well, I'd do it.

But there has to be a selection of content, not one subscription per magazine. It has to be a unified browse/view UI, not a hundred little icons on my phone. And there has to be a way to browse casually before purchasing. Like in a bookstore.

That's a really clever idea... I wouldn't have thought of a subscription model for a tablet. I agree, it's got to be something where you can choose your content, not get stuck with someone else's idea of what you want. I've seen an app called Zinio (works on desktop too) that is a sort of digital newsstand and has all sorts of digital magazines. It's buggy but something like that would be really cool.

This is a trend Chris Anderson charts in his book Free. In this article, Anderson outlines the book's argument (and offers a nice overview of razor blade economics, an old marketing tactic that's as relevant today as it ever was).

Reading this piece made me recall an earlier analysis, which estimates that the New York Times could buy every one of its subscribers a Kindle, switch to an all-digital delivery platform, and effectively halve its printing and delivery budget. And those figures are from 2009 -- when the Kindle retailed for $359. Think about how different the numbers would be today.

But then you'd have approximately 830,000 people locked into one of the least open ecosystems in contemporary digital publishing, and another problem altogether.

Reminds me a little of the Sierra Mist commercial where Fred Willard's arrested for shoplifting the can of Sierra Mist Free.

Cop: "But if they're giving it away for free...how will they make money?"

Willard: "Volume, silly. Don't you know anything about business?"

The original, fundamental model here is the iTunes Music Store, back in 2003, which was a complete revolution in music sales, freeing consumers form the 'tyranny of the album.' It proved to the world that people would pay 99 cents for music THAT COULD BE OBTAINED FOR FREE, with a little effort.

Before the ITMS there was only Napster.

There's your low-cost model...

Apple's been developing and honing that sales model since 2003.

You can't just copy it and hope to beat it. It's like thinking "Hey, I'll set up an online bookstore! I'm sure I can beat Amazon at their own game!"

Subscription pads have been tried. There are a host of competitors trying to beat Apple at their own game, and failing, because they're skating to where the puck IS, instead of where it's going to be. A trite truism, perhaps, but it's also true.

HP failed miserably in the pad market; this is WHY you have your $99 Touchpad...because they're being liquidated as part of a failed business.

The razor blade marketing model works, but it is based on a social requirement that everyone (about half the population) shaves regularly. Most of the examples don't have the same social pressure. I might get better news from a paper, or a magazine, I can get free news from broadcast TV.

The education system is the key. Every child goes to school. Every child needs textbooks, workbooks, reference books. The model should be based on subject concepts, like chapters not textbooks for 1 year. every student gets a work pad, all text book suppliers use the same file types like PDF for theory and facts. ODF text document template (.odf) for interactive assignments etc.

Open Office could be the standard for classrooms, so that almost no additional costs would be transferred to parents. If the interactive assignments in most classes could be graded by computer there would be a much smaller paper footprint for schools. Care would have to be taken to minimize the printing cost in class rooms for written assignments. By avoiding the smart boards that many schools are advocating and moving to direct linked from the ' workpad to the student's workpad some savings might be achieved.

Technologically teachers would need to be able to control workpad to workpad interaction while they are in instruction mode. Classrooms may require shielding, and wifi and bluetooth traffic would require master control for limited times during class. Possibly these controls could be enhanced, so that students unable to be in class locally could interact.

I thought about the HP touchpad, but after having looked at one briefly at Costco, didn't think the cost savings was worth it for the feature economy. Sometimes paying more really does give you more.

That said, I test drove an Acer Iconia A500 tablet earlier this summer. Beautiful screen, fast (Tegra 2) processor, Google Maps (with the Download Tiles add-in) was superb, and the 2-3 games I tried looked and played awesome. But ... one of my daughter's obsessions is the immersive Poptropica site. Guess what? It requires a version of Flash that isn't available for Android yet, so she couldn't take Poptropica wherever there was Wifi. :(

Another no-starter: Skype for Android won't do video. It's coming ... someday. But I want it now (oops, sounding a bit like Veruca Salt, ain't I?) if I'm buying a tablet with front and rear cameras.

Having watched and been involved with digital media (particularly Open Ebooks a few years ago), I know the software and the creativity is there. But IMHO widespread adoption of these devices won't happen until there is a more consistent array of apps, capabilities, and features that don't require people to look closely at the sticker. Even at $100, no one wants to take a toy home, sit on the couch, and find out it doesn't "just work."

I think that what folks seem to be missing is that HP has been using the razor blade marketing strategy for years by way of the printer / Ink model. It wouldn't surprise me at all to hear that this was a deliberate test of the market to gauge demand. Certainly the value proposition is the only thing keeping me out of the tablet market.
The subscription model, with HP getting a portion of subscription revenue, could help pad the profits. What do you think keeps Radio Shack selling cell phones? It's not the hardware.
I don't know what HP's actual production costs are and so can't speculate on profitability, but I do know about economies of scale and if HP can sustain sales volume with the sub $200 price point then they can probably pull a Wal-Mart and press suppliers for lower prices to improve profitability. I see no reason why they couldn't find a way to maintain the price structure if convinced the demand is there.

Well this is all very nice and I understand where people are coming from wrt have all sorts of electronic devices available to everyone however......
Where will all the purchasers be if businesses (newspaper/magazine printers etc) are replacing people with electronic devices. All very well that they could all end up costing just $100 or therebouts however who will have $100 to spend on them.
Libraries have books that you can smell, feel and read (learn to spell at the same time). Anyone ever seen the movie Farenheit 451??

I don't follow. Bradbury wrote about a dysfunctional society where literature was banned and books were systematically confiscated and burned. We're talking about devices that allow literature to be distributed widely to anyone possessing a device. These aren't the same.

Yes, it's possible that the manufacturers of the devices will implement restrictive copy protection schemes, use closed file formats that become obsolete or abandoned and forgotten, refuse to support lending of material between people, or fail to support the specific lending model of a library. But all of these hurdles are issues of policy rather than limitations innate to the technology of digital books. In my opinion, anyway.

In addition, take a look at the incredible range of freely available material with no digital restrictions laid on it. Everything from Project Gutenberg to MIT Open Courseware to Baen Publishing's Free Library to all kinds of material published with Creative Commons licenses. In the long run, these kinds of digital resources are likely to outlast the stuff that's locked up with DRM simply because it'll be so much easier to preserve it. That includes all the posts in this thread since they're explicitly licensed as CC-BY-SA.

So far it is a bit difficult to foretell if HP’s strategy to promote its tablets will be a springboard for the company to position itself better on the market. However, I think, that will at least contribute to increase customers’ appetite for tablets. Digital content providers could take advantage of this situation, but I doubt they will in the short term. The reason is that the HP’s tablet has a main drawback, the discontinuation of the product. Users will unlikely receive any update for their applications in the future. That translates into a value proposition of Less-for-Much-Less. So, many digital magazines and other content providers will prudently wait for feedback of users experience before initiating important investments.

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